Monday, February 27, 2017

The Red Tape Times (article 23)

Non-Practicing Entities Should Be Wiped Out

The EFF wrote an interesting piece on personal jurisdiction in cases in which a non-practicing entity, commonly known as a patent troll, sent demand letters to productive companies outside of their jurisdiction and forced said companies, by federal court ruling, to challenge the validity of the patent or their claim in a distant court. The gist is that demand letters do not establish personal jurisdiction over out of state NPEs, but productive companies that provide a product or service nationwide, can be sued for patent infringement anywhere. This gives NPEs a clear legal advantage over productive companies. Overturning the two federal rulings that established this precedent would be a step in the right direction, but the larger problem of NPEs themselves still lies unaddressed. NPEs cost productive companies 29 billion per year, a cost that is ultimately passed on to consumers. Now patents are government granted monopolies, like private property in land, and as such the returns on them are rents. They should be taxed at a high rate so the benefits of them are reciprocated back to the public at large and over proliferation of patenting is discouraged. Optimally, a graduated royalty income tax and patent sales tax would replace the corporate income tax, the capital gains tax, and other taxes on profits. To ensure that patentees actually produce something of value, NPEs should be forced to pay a 100% royalty income tax, which would effectively wipe them out, the same way land speculation would be wiped out if land rent were taxed at 100%. Furthermore, a high tax rate on patent royalties and patent sales would be more of a user fee than an actual tax and would not penalize productivity.